Category Archives: duty of loyalty

If an Employee Breaches his Fiduciary Duty by Competing With His Employer While Still Employed, May Others Involved in Causing the Breach Also be Liable?

In Vibra-Tech Engineers, Inc. v. Kavalek, et al., No. 08-2646-NLH (D.N.J. Dec. 22, 2011), an employee breached his duty of loyalty (also called a fiduciary duty) to his employer by starting a competing business while he was still employed.

The employer not only sued the employee, but also two corporations.  The reason was that “[o]ne corporation, IGS, directly competed with Plaintiff and the other, Geotech, sold [Plaintiff’s] equipment.”  IGS employed the employee during his employment with the Plaintiff and the Plaintiff and his wife owned Geotech which facilitated the offending sales.  Id. at 14.

The Court found that it needed more facts to determine whether the two corporate Defendants should remain in the case.  It needed to consider such factors as “whether and how Individual Defendants utilized the corporate veil to facilitate the breach of their duties . . . ” Id. Because that evidence had not been presented, the Court denied Summary Judgment.

The importance of this case is to illustrate that in a breach of fiduciary duty lawsuit, the parties who facilitated the breach are also at risk of being included as defendants.

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